What is the minimal variance, Financial Accounting

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Consider the expected return and standard deviation of the following two assets:

Asset 1: E[r1]=0.1 und σ1=0.3

Asset 2: E[r2]=0.2 und σ2=0.4

(a) Draw (e.g. with Excel) the set of achievable portfolios for the cases: (i) ρ12=-1, (ii) ρ12=0.

(b) Suppose ρ12=0. Which portfolio has the minimal variance? What is the minimal variance?

 


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